FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company applies the following three-level hierarchy of valuation inputs for measuring fair value:


•	Level 1 - Quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date.


•	Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.


•	Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:

Financial Instruments Carried at Fair Value: Derivative instruments are recorded on the consolidated balance sheets as either assets or liabilities measured at fair value. During the reporting period, the Company's derivative financial instruments consisted of interest rate swap agreements, foreign currency forward contracts and cross-currency swap agreements. The Company estimated the fair value of its interest rate swap agreements based on Level 2 valuation inputs, including fixed interest rates, LIBOR and BBR implied forward interest rates and the remaining time to maturity. The Company estimated the fair value of its British pound forward contracts based on Level 2 valuation inputs, including LIBOR implied forward interest rates, British pound LIBOR implied forward interest rates and the remaining time to maturity. The Company estimated the fair value of its cross-currency swap agreements based on Level 2 valuation inputs, including EURIBOR implied forward interest rates, BBR implied forward interest rates and the remaining time to maturity.

The Company's recurring fair value measurements using significant unobservable inputs (Level 3) relate solely to the Company's deferred consideration from the HOG acquisition in 2017 and the Freightliner acquisition in 2015. The fair value of the deferred consideration liability were estimated by discounting, to present value, contingent payments expected to be made.

Financial Instruments Carried at Historical Cost: Since the Company's long-term debt is not actively traded, fair value was estimated using a discounted cash flow analysis based on Level 2 valuation inputs, including borrowing rates the Company believes are currently available to it for loans with similar terms and maturities.

The following table presents the Company's financial instruments that are carried at fair value using Level 2 inputs at December 31, 2017 and 2016 (dollars in thousands):



	2017		2016
Financial instruments carried at fair value using Level 2 inputs:
Financial assets carried at fair value:
British pound forward contracts	$	13,657	$	26,359
Cross-currency swap contracts	8,662		680
Total financial assets carried at fair value	$	22,319	$	27,039
Financial liabilities carried at fair value:
Interest rate swap agreements	$	14,382	$	15,158
British pound forward purchase contracts	829		17
Total financial liabilities carried at fair value	$	15,211	$	15,175

The following table presents the Company's financial instrument carried at fair value using Level 3 inputs as of December 31, 2017 and 2016 (amounts in thousands):



	2017		2016
Financial instrument carried at fair value using Level 3 inputs:
Financial liabilities carried at fair value:
Accrued deferred consideration - Freightliner	$	—	$	31,933
Accrued deferred consideration - HOG	$	5,974	$	—

At the date of acquisition of Freightliner in 2015, the contingent liability represented the aggregate fair value of the shares transferred to the Company by the Management Shareholders in exchange for the right to receive cash consideration for the representative economic interest of approximately 6% in Freightliner in the future (deferred consideration). This contingent liability has been adjusted each period to represent the fair value of the deferred consideration as of the balance sheet date. The Company bought out this deferred consideration in November 2017. See Note 3, Changes in Operations, for additional information regarding this contingent consideration.

At the date of acquisition of HOG in 2017, the contingent liability represented the fair value of the deferred consideration payable to the sellers upon satisfaction of certain conditions, which the Company expects to be paid in 2021. This contingent liability is adjusted each period to represent the fair value of the deferred consideration as of the balance sheet date. To do so, the Company recalculates the HOG's deferred consideration based on the contractual formula as defined in the stock purchase agreement. This calculation effectively represents the present value of the expected payment to be made upon settlement of the deferred consideration. Accordingly, such recalculation will reflect both the impact of the time value of money and the impact of changes in the expected future performance of the acquired business, as applicable. The Company expects to recognize future changes in the contingent liability for the estimated fair value of the deferred consideration through other expenses within the Company's consolidated statement of operations. These future changes in the estimated fair value of the deferred consideration are not expected to be deductible for tax purposes. See Note 3, Changes in Operations, for additional information regarding HOG.

The following table presents the amounts recognized, through other expenses, within the Company's consolidated statements of operations during the years ended December 31, 2017, 2016 and 2015 as a result of the change in the estimated fair value of the deferred consideration (dollars in thousands):



	2017		2016		2015
Freightliner	$	2,405	$	2,278	$	—
HOG	$	298	$	—	$	—

The following table presents the carrying value and fair value using Level 2 inputs of the Company's financial instruments carried at historical cost at December 31, 2017 and 2016 (dollars in thousands):



	2017				2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial liabilities carried at historical cost:
United States term loan	$	1,204,714	$	1,208,657	$	1,415,873	$	1,422,512
U.K. term loan	124,747		126,480		121,149		121,594
Australian Credit Agreement	513,192		528,105		484,703		501,909
Partner Loan Agreement	186,085		184,750		172,154		171,435
Revolving credit facility	225,155		229,483		74,297		81,192
Other debt	2,419		2,426		4,882		4,889
Total	$	2,256,312	$	2,279,901	$	2,273,058	$	2,303,531